Caracas — Going to the store for a kilo of rice and purchasing it in exchange for a few grams of coffee is a transaction that qualifies as a barter, but the increase in the frequency of this method of payment in Paraíso de Chabasquén, in the central-western region of Venezuela, has tempted its inhabitants to push for its legalization as a local currency.
The depreciation of the bolivar by close to 80% in the last two years, added to the shortage of cash, both of Venezuelan banknotes and foreign currency in the interior of the country, has prompted merchants and inhabitants of remote areas to reinvent the buying and selling process.
Thus, in this town of 20,500 inhabitants, located in the state of Portuguesa, the signs with the official exchange rate authorized by the central bank of Venezuela (BCV) displayed in the windows of grocery stores and other commercial establishments have begun to be replaced by the variant exchange rate for coffee.
Local residents calculate that the decision was imposed around 10 years ago, when President Nicolás Maduro came to power following the death of Hugo Chávez. This ‘exchange rate’ was not formally acknowledged back then, but emerged as an alternative method to appease the economic chaos surrounding the payment of goods.
Coffee growers were the first to grasp the opportunity, and exchanged quintals of parchment coffee - a product resulting from washing the beans and removing all the external layers before drying them - for fertilizers, farm tools and other products.
The increase in the value of coffee, coupled with the deepening of the economic crisis in Venezuela, with annual inflation of 471%, led to a greater number of transactions. A quintal of coffee, a 46-kilo sack, estimated to be worth between $140 and $160, is a valuable commodity that can be used for the purchase of basic necessities.
Of the 3,000 coffee producers in the region, some use entire or future harvests for the purchase of a property or vehicle. Rafael Montaña is one of them, and who acquired a vehicle using this payment method.
“Here most of the transactions are made with coffee, both in Chabasquén and in the surrounding areas of the municipality of Monseñor José Vicente de Unda. It is the main economic commodity, it is used on a daily basis, to do any business and make large or small purchases, and it is a culture that has been established since there was no cash or bank agencies to access,” Montaña told Bloomberg Línea.
Coffee as legal tender?
The price of coffee and the high demand for the bean within the country has led the Chamber of Commerce in the region to consider its legalization as local currency.
Emmanuel López, representative of the chamber, told Bloomberg Línea that they are in the process of reaching agreements to establish technical discussions to advance the proposal for discussion with the Venezuelan government.
“We want to present it to the state for approval, they are aware of the coffee that is unduly entering the country, and how this has affected national producers, and they have taken measures,” López said. “But we would like our coffee to be legal tender,” he said, adding that coffee prices are being impacted by imports.
Coffee beans’ value is similar to that of the US dollar, and it is even used as a “safeguard currency,” López says.
Many of the inhabitants who are not engaged in production have opted to acquire it when its value is low, and then wait for some upturn in the price quotation that is governed by the New York Stock Exchange for the categories of specialty coffee.
“The government, at the beginning of the harvest, gave a value for washed coffee to try to protect the producer, but the reality is that coffee’s value on the New York Stock Exchange is being taken into account, and when they are specialty coffees they enter into auction, and their valuation goes far beyond the price on the stock exchange,” López says.
In his opinion, converting coffee into a legal tender in these localities will not prevent its commercialization to the rest of the country, even though the profitability of its transportation to other states has decreased.
He recognizes that the coffee exchanges known as ‘trueques’, or barter exchanges) could also undergo modifications, incorporating other products or articles into transactions. This is part of the economic distortion in the country, and the absence of adjustments to avoid it, he says.